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In recent years, the Army Corps of Engineers (Corps) has had more work to accomplish than funds available. The Congress has supported the Corps' need to reprogram funds to complete projects. Reprogramming allows the Corps to move funds from projects that can not use available funds to those that can. However, concerns have been expressed about whether the Corps reprogrammed funds in accordance with applicable guidance. GAO determined for fiscal years 2003 and 2004 (1) the amount of funds reprogrammed; (2) if the Corps followed reprogramming guidance; (3) why the Corps reprogrammed funds; and (4) how effective the Corps' reprogramming strategy was in managing funds.

In fiscal years 2003 and 2004, the Corps reprogrammed funds over 7,000 times and moved over $2.1 billion among projects within the investigations and construction appropriations. Moreover, funds were moved in and/or out of nearly two thirds of the projects within these appropriation accounts. Comparable data for the operation and maintenance appropriation could not be provided by the Corps. GAO reviewed a random sample of 271 general investigation, construction general, and operation and maintenance projects and found that the Corps generally reprogrammed funds in accordance with its guidance. However, in eight cases, the Corps' reprogramming actions did not comply with the guidance because it either exceeded established reprogramming thresholds and/or did not provide the appropriate notification to the Congress. Although in most cases the Corps reprogrammed funds according to its guidance, this guidance is written in such a way that most reprogramming actions do not count as reprogramming actions toward the congressional notification thresholds, thereby diminishing the Congress' knowledge and oversight of how the Corps spends appropriated funds. In many cases, the Corps reprogrammed funds from projects that experienced unforeseen delays to projects that could make use of additional funds. On the other hand, reprogramming actions were conducted that were inconsistent with the Corps' reprogramming guidance, such as to achieve a Corps goal that all projects carry no funds into the next fiscal year. Some of these movements were as small as 6 and 7 cents. Corps guidance states that small reprogramming actions are inconsistent with sound project management and increase its administrative burden. Funds were also moved into projects that had a reported "need" and then were subsequently removed because they were suddenly "excess"--sometimes on the same day or within a few days or weeks. Such movements appear to serve little useful purpose and create an administrative burden for the Corps because of the time and effort needed to accomplish these movements. The Corps has come to rely on reprogramming as its primary method to manage project funds. The use of reprogramming is no longer used as a tool when emergencies and unforeseen circumstances occur but instead has become the regular, recurring financial management practice. Finally, the use of numerous reprogramming actions to manage project funds, without a set of formal Corps-wide priorities, has resulted in an uncoordinated movement of funds between projects, with little consideration to pending needs or long-term planning.

Recommendations for Executive Action

Status: Closed - Implemented

Comments: The Corps issued Engineering Circular 11-2-189 on Dec. 31, 2005 that requires monthly measurement of work progress tied to the project's management plan and the adjustment of project work allowances as needed.

Recommendation: To eliminate the burden of excessive reprogramming actions and to provide better financial management of projects, the Secretary of Defense should direct the Commanding General and Chief of Engineers of the U.S. Army Corps of Engineers to develop a financial planning and management system for the investigations, construction, and operation and maintenance appropriations that, at a minimum, periodically reviews project schedules and performance and revises funding allocations as needed.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: On Dec. 31, 2005, the Corps issued new guidance that replaces the past policy of allowing temporary "cash flow" from projects and requires project management plans and accurate and achievable expenditure schedules. Engineering Circular 11-2-189 also states that the focus will be on executing funds on the projects for which they were appropriated.

Recommendation: To eliminate the burden of excessive reprogramming actions and to provide better financial management of projects, the Secretary of Defense should direct the Commanding General and Chief of Engineers of the U.S. Army Corps of Engineers to provide direction and training to change the culture prevalent throughout the Corps that reprogramming is an acceptable, routine financial management practice and instead place greater emphasis on the use of financial planning approaches and priority-setting mechanisms for managing project funding.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: On Dec, 31, 2005, the Corps issued Engineering Circular 11-2-189 that established a financial management system that changed the allocation of funds to projects from one time at the beginning of the year to quarterly based on need.

Recommendation: To eliminate the burden of excessive reprogramming actions and to provide better financial management of projects, the Secretary of Defense should direct the Commanding General and Chief of Engineers of the U.S. Army Corps of Engineers to develop a financial planning and management system for the investigations, construction, and operation and maintenance appropriations that, at a minimum, changes the way the Corps allocates funds from an annual basis to a more frequent basis that reflect actual schedule and project performance.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: On December 31, 2005, the Corps issued Engineering Circular 11-2-189 that defined what actions counted as reprogrammings and clarifies when reprogramming actions need to approved by the House and Senate Appropriations Committees.

Recommendation: To eliminate the burden of excessive reprogramming actions and to provide better financial management of projects, the Secretary of Defense should direct the Commanding General and Chief of Engineers of the U.S. Army Corps of Engineers to work with congressional committees to provide meaningful and consistent guidance for the investigations, construction, and operation and maintenance appropriations for what actions count as reprogrammings and what reporting thresholds should apply on a program and project basis.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: On Dec. 31, 2005, the Corps established new guidance that set reprogramming priorities for Corps projects.

Recommendation: To eliminate the burden of excessive reprogramming actions and to provide better financial management of projects, the Secretary of Defense should direct the Commanding General and Chief of Engineers of the U.S. Army Corps of Engineers to develop a financial planning and management system for the investigations, construction, and operation and maintenance appropriations that, at a minimum, develops and implements criteria for setting reprogramming priorities.